FW: RAM Ratings reaffirms AAA rating of Eternal Icon's Plaza 33-backed Senior MTN

Published on 03 Apr 2018.

RAM Ratings has reaffirmed the AAA/Stable rating of Eternal Icon Sdn Bhd’s (EISB or the Issuer) RM87.0 million Senior MTN. The reaffirmation is premised on our expectation that the performance of the collateral for the transaction – Plaza 33 (the Property) – will remain healthy despite the challenging office market environment. During the review period, Plaza 33 recorded robust rental reversions and near-full occupancy. Given its consistent performance to date, we have revised the Property’s sustainable cashflow from RM18.5 million to RM25.0 million per annum. In our assessment, we have given partial benefit to additional rental income from the construction atop Tower A and the proposed repurchase of Level 13 of Tower A – both to be funded by Subordinated Class MTN (Sub-MTN) – in view of the subdued office market and impending competition in the vicinity over the next few years.

As the Issuer’s rating is already the highest possible on RAM’s domestic rating scale, the revision only improves credit support for the Senior MTN, as reflected by its loan-to-value ratio of 33.1% and stressed debt service coverage ratio of 3.38 times (from 44.7% and 2.50 times, respectively, previously). For FY Dec 2017, Plaza 33 managed to record net property income of RM25.9 million (unaudited). Under this transaction, EISB will use net rental collections from the Property to meet coupon obligations in respect of the Senior MTN. The principal redemption is expected to be funded by exercising the Property Call Option upon the expected maturity of the Senior MTN or by refinancing the Senior MTN through the issuance of Sub-MTN, failing which, via the sale of the Property by the Security Trustee.

Single-asset concentration risk continues to be a key moderating factor. Furthermore, tenant concentration risk remains pronounced as the Property’s top three tenants occupied 46.4% of its total net lettable area (NLA) as at end-December 2017, contributing 44.0% of its monthly gross rental income. This risk is, however, partly mitigated by the quality of Plaza 33’s lease profile as well as the respectable rental renewals and reversion observed to date. The Property’s lease maturity profile is well spread, with leases for a respective 39%, 29% and 32% of its total NLA expiring in 2018, 2019 and 2020. We have maintained our opinion that the Property is of above-average quality, as reflected in its RAM Property Score of O-3.65, out of a maximum of O-5.00.

This transaction is a commercial real estate-backed transaction sponsored by Plaza 33 Sdn Bhd – the owner of Plaza 33, an integrated commercial office building in Section 13, Petaling Jaya. Under a 15-year MTN Programme of up to RM400.0 million, RM86.0 million of Senior MTN and RM220.0 million of Sub-MTN have been issued to date. 

 

Analytical contact
Evelyn Quek
(603) 7628 1095
huijiun@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

 

 

 

Best Regards,

Gan Yeow Hock

Data Management Executive - DCM

 

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